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What is it?

The Belgian Tax Shelter is a government-approved tax incentive designed to encourage the production of audiovisual works. It is one of the very few audiovisual systems that applies to the whole of Belgium rather than to a particular language community.

It is a win-win-win situation for the three parties involved: the producer is offered a very attractive way to finance projects, the investor obtains tax exemption through a virtually risk-free investment, and the Belgian
state benefits from increased economic activity and spending.

The Finance Ministry estimates that from 2003 to 2011 the system channelled over €600 million into films and other audiovisual works. Tax Shelter activities continue to grow. The ceiling, if there is one, is not yet in sight.

Is it legal?

Despite its name, using the Tax Shelter involves nothing illegal provided that you follow the rules and form partnerships with reputable companies. We strongly advise you to work with established local producers that are members of the producers associations.

Who can benefit from it?

Producers
Only Belgian companies and Belgian branches of foreign companies (subject to non-resident corporate tax in Belgium) whose main purpose is the production of audiovisual works are eligible. They may not have direct links to a broadcaster. At the moment of signing the framework agreement, the resident or the branch of the foreign audiovisual production company may not have any outstanding debts to the Social Security Office (ONSS/RSZ).

International co-productions with Belgium may apply for the Tax Shelter system, provided that they are approved as a European work as defined by the Audiovisual Media Services (AMS) Directive of 10/03/2010 (2010/13/EU).

Investors
All resident companies and Belgian branches of non-resident companies that make taxable profits in Belgium can benefit from this tax regime, with the exception of companies whose main purpose is the development and the production of audiovisual works (i.e. producers) and broadcasters. The company making the investment may not be a credit institution on any account.

There is no limit on the number of investors allowed to participate in a production. Each investor, as well as the producer(s), must satisfy their respective obligations and conditions.

How does it work?

For producers

A producer can attract one or more eligible companies to invest in one project, provided that the total amount of Tax Shelter money does not exceed 50% of the production budget.

Part of this investment, up to a maximum of 40%, is usually in the form of a loan, which the producer must return to the investor as a matter of course. The remaining 60% (the equity part) buys rights in the commercial exploitation of the film. If investors don’t want to wait for the production to make money, they may arrange a “put option” to sell back their rights after a certain period. The value of this option is determined in the agreement between producer and investor, and it has to be invoked at the latest when the work begins its commercial career.

The production and operating costs for the audiovisual work incurred in Belgium must amount to at least 150% of the equity part of the investment (not the loan part), thus 90% of the total Tax Shelter investment. This money must be spent within a maximum of 18 months after signing the framework agreement.

Production and operating costs incurred in Belgium are understood as being: the operating costs and financial costs constituting professional income which is subject, in the name of the beneficiary, to personal income tax, corporation tax or non-resident income tax.

• The fee, subject to non-resident income tax or to personal income tax, for a non-resident actor shooting a film in Belgium;
• The sum paid for services to a Belgian office of a foreign company

 

It is possible to ask the Office for Advance Decisions in Tax Matters of the Federal Public Service for Finance for an advance decision (or ruling), aimed at adjusting the final Tax Shelter application. This procedure is not compulsory, though.

What's the advantage for the producer?

Let’s take the example of €1,000,000 financing through Tax Shelter investment, negotiated by an intermediary company. This means the production budget is at least €2,000,000. Of the €1,000,000 invested, €600,000 is equity (the required minimum) and €400,000 is in the form of a loan (the maximum allowed).

With the equity part of the investment the investor buys rights in the film. This means he or she can share in the profits. Because this involves an element of risk, the investor can also decide to sell the rights back to the producer at a profit and get a guaranteed minimum return of 4.52%. This is called the “put option”. Depending on what was negotiated, this option could amount to €117,120 (i.e. €90,000 theoretical risk + the minimum return the investor wants).

On the loan part, the investor in this case receives a 6.75% interest or €27,000. So, at the end of the day, the loan will be paid back in full + the interest = €427,000.

Costs related to a bank guarantee on the loan and the intermediary’s fee could be €82,500, depending on what was negotiated°.

In this case, the advantage for the producer therefore is €373,380 [€1,000,000 (invested sum) - €400,000 (loan) - €27,000 (interest on loan) - €117,120 (put option) - €82,500 (costs and fees°)].

On a Tax Shelter investment of €1,000,000, the producer’s advantage usually ranges from €300,000 to €400,000 or 15% to 20% of the total production budget.

From an investor's point of view

The mechanism allows an eligible company (a Belgian company or a Belgian branch of a non-resident company, except for production companies and broadcasters) providing financial backing for audiovisual productions to benefit from exemption of any retained taxable profits worth up to 150% of the sums actually paid. The upper limit on investment is 50% of a company’s retained profits, up to a ceiling of €500,000. In this way, the legislator ensures limited financial risks for the investors.

Part of this investment, up to a maximum of 40%, is usually in the form of a loan, which the producer must return to the investor as a matter of course. The remaining 60% (the equity part) buys rights in the commercial exploitation of the film. If investors don’t want to wait for the production to make money, they
may arrange a “put option” to sell back their rights after a certain period.

For example, a company invests €500,000 in a film (suggesting a minimum budget of €1,000,000) of which €300,000 is in the form of co-production equity and €200,000 in the form of a loan. It can therefore be granted an exemption of retained taxable profits amounting to €750,000, which results in a tax saving of
€254,925.

What are the main conditions?

Productions must be audiovisual works that belong to one of the following categories:

• Live-action or animated features, medium-length or short films and documentaries intended to be shown theatrically;
•  Live-action and animated made-for-television series, telefilms and documentaries.

 

The audiovisual work must be approved by the competent departments of the Flemish, French or Germanspeaking communities of Belgium as a European work. According to the Audiovisual Media Services (AMS) Directive of 10/03/2010 (2010/13/EU), a European work can be defined as an audiovisual production:

1. originating from the European Union (EU) Member States;
2. originating from European third countries party to the European Convention on Transfrontier Television ofthe Council of Europe;
3. co-produced within the framework of agreements related to the audiovisual sector concluded between the Union and third countries and fulfilling the conditions defined in each of those agreements.

 

The application of the provisions of points 2. and 3. shall be conditional on works originating in Member States not being the subject of discriminatory measures in the third country concerned.

The works referred to in points 1. and 2. are works mainly made with authors and workers residing in one or more of the States referred to in those provisions provided that they comply with one of the following three conditions:

• They are made by one or more producers established in one or more of those States;
• The production of the works is supervised and actually controlled by one or more producers established in one or more of those States;
• The contribution of co-producers of those States to the total co-production costs is preponderant and the co-production is not controlled by one or more producers established outside those States.

 

Works that are not European works following the definition above but that are produced within the framework of bilateral co-production agreements concluded between Member States and third countries shall be deemed to be European works provided that the co-producers from the Union supply a majority share of the total cost of production and that the production is not controlled by one or more producers established outside the territory of the Member States.

Co-producers, intermediaries and banks

The first and best step for any foreign producer hoping to benefit from the Tax Shelter is to find a local co-production partner (see www.vfpb.be / www.votp.be / www.locationflanders.com).

Investors can be approached directly to arrange investment under the Tax Shelter, although this can involve some complex legal work. An alternative is for the producer to work with an intermediary company, which will match potential investors with productions. The intermediaries make their money primarily by charging a fee to producers, while some also take commission in any profits to investors.

In the early years of the Tax Shelter there was competition between intermediaries to offer the highest guaranteed return to investors. More recently, the federal government has introduced a 4.52% cap on the return intermediaries can guarantee, with any profits above that depending on the box office.

As well as specialised intermediary companies, some Belgian banks have created film funds or investment
products to bring the advantage of the Tax Shelter to those of their investors who want to participate. These include BNP Paribas Fortis and Belfius. This development has brought further investor confidence to the market.

Contacts

Producers

Flemish Film Producers’ Association - VFPB
Kartuizersstraat 19 b30
BE-1000 Brussels
Belgium
T +32 2 643 01 35
F +32 2 643 01 39
info@vfpb.be
www.vfpb.be

Independent Television Producers Flanders - VOTP
Kartuizersstraat 19 b30
BE-1000 Brussels
Belgium
T +32 2 643 01 35
F +32 2 643 01 39
info@votp.be
www.votp.be

 

Banks

BNP Paribas Fortis Film Fund
David Claikens; Alex Verbaere
Warandeberg 3 - 1VA3D
BE-1000 Brussels
Belgium
T +32 2 228 90 59 /
+32 2 565 25 24F +32 2 565 27 07
david.claikens@bnpparisbasfortis.com
alex.verbaere@bnpparisbasfortis.com
www.filmfund.fortis.com

Belfius
See Casa Kafka Pictures

 

Intermediaries

Casa Kafka Pictures
Isabelle Molhant
Kolonel Bourgstraat 133
BE-1140 Brussels
Belgium
T +32 2 730 44 04
F +32 2 726 64 70
im@casakafka.be
www.casakafka.be

Gypsy Tax Shelter Consulting
Piet Sonck
Solleveld 6A
BE-9550 Herzele
Belgium
piet.sonck@skypro.be
www.gypsyproductions.be

Making Of
Havenlaan 75
BE-1000 Brussels
Belgium

Making Of is a joint venture set up by
some of the leading producers.

Caviar
Barbara Dyck
barbara.dyck@caviarcontent.com

Eyeworks Film & TV Drama
Carolien Vergote
carolien.vergote@eyeworks.tv

Skyline Entertainment
Jan Theys
jan@tvskyline.com

Mollywood
Sara Berckmans; Kelly Heijlen
Kievitstraat 44
BE-2400 Mol
Belgium
T +32 14 34 69 99
F +32 14 32 12 24
sara@mollywood.be
kelly@mollywood.be
www.mollywood.be

Scope Invest
Flageyplein 7
BE-1050 Brussels
Belgium
T +32 2 340 72 00
F +32 2 340 71 98
info@scopeinvest.be
www.scopeinvest.be

Tax Shelter Films Funding
Tax Shelter.be nv
Hubert Gendebien
Reyerslaan 110
BE-1030 Brussels
Belgium
T +32 2 770 21 33
F +32 2 732 47 00
hubert@taxshelter.be
www.taxshelter.be

uMedia
Martin Metz, Iwona Sellers,
Bastien Sirodot
Louizalaan 235
BE-1050 Brussels
Belgium
T +32 2 544 00 00
F +32 2 372 91 38
martin@ufilm.be; iwona@ufilm.be
bastien@film.be
www.umedia.eu

 

Tax Authorities & Government Bodies

Ministry of the Flemish Community
Department of Culture, Youth, Sport and Media
Office of Policy and Management
Luc Piette
Arenbergstraat 9
BE-1000 Brussels
Belgium
T +32 2 553 46 61
F +32 2 553 45 79
film@vlaanderen.be

For any further information on the
system:

Federal Public Service Finance
Office for Advance Decisions in
Tax Matters
Véronique Tai
Wetstraat 24
BE-1000 Brussels
Belgium
T +32 2 579 03 33
veronique.tai@minfin.fed.be
www.ruling.be

Federal Public Service Finance
Fiscal Department for Foreign
Investments (Tax Shelter)
Parliament Corner, Wetstraat 24
BE-1000 Brussels
Belgium
T +32 2 57 938 66
F +32 2 57 951 12
taxinvest@minfin.fed.be
www.taxinvest.belgium.be

Flanders Investment and Trade
Gaucheretstraat 90
BE-1030 Brussels
Belgium
T +32 2 504 87 11
F +32 2 504 88 99
info@fitagency.be
www.fitagency.be

FIT has representatives in several
countries worldwide.